Correlation Between GUINEA INSURANCE and CONOIL PLC

Can any of the company-specific risk be diversified away by investing in both GUINEA INSURANCE and CONOIL PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GUINEA INSURANCE and CONOIL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GUINEA INSURANCE PLC and CONOIL PLC, you can compare the effects of market volatilities on GUINEA INSURANCE and CONOIL PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GUINEA INSURANCE with a short position of CONOIL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of GUINEA INSURANCE and CONOIL PLC.

Diversification Opportunities for GUINEA INSURANCE and CONOIL PLC

0.68

Correlation Coefficient

GUINEA INSURANCE  CONOIL PLC

Poor diversification

The 3 months correlation between GUINEA and CONOIL is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GUINEA INSURANCE PLC and CONOIL PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONOIL PLC and GUINEA INSURANCE is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GUINEA INSURANCE PLC are associated (or correlated) with CONOIL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONOIL PLC has no effect on the direction of GUINEA INSURANCE i.e., GUINEA INSURANCE and CONOIL PLC go up and down completely randomly.

Pair Corralation between GUINEA INSURANCE and CONOIL PLC

Assuming the 90 days trading horizon GUINEA INSURANCE is expected to generate 1.2 times less return on investment than CONOIL PLC. In addition to that, GUINEA INSURANCE is 2.91 times more volatile than CONOIL PLC. It trades about 0.06 of its total potential returns per unit of risk. CONOIL PLC is currently generating about 0.2 per unit of volatility. If you would invest  29,000  in CONOIL PLC on December 5, 2024 and sell it today you would earn a total of  7,800  from holding CONOIL PLC or generate 26.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

GUINEA INSURANCE PLC  vs.  CONOIL PLC

GUINEA INSURANCE PLC

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GUINEA INSURANCE PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, GUINEA INSURANCE demonstrated solid returns over the last few months and may actually be approaching a breakup point.

CONOIL PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CONOIL PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, CONOIL PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GUINEA INSURANCE and CONOIL PLC

The main advantage of trading using opposite GUINEA INSURANCE and CONOIL PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GUINEA INSURANCE position performs unexpectedly, CONOIL PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CONOIL PLC will offset losses from the drop in CONOIL PLC's long position.

The idea behind GUINEA INSURANCE PLC and CONOIL PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.